AUD/NZD Buyers Push to Overcome Two-Week Resistance

Market Overview

On Monday, AUD/NZD continues to push higher as buyers attempt to breach a two-week resistance zone. Despite both Australia and New Zealand being commodity exporters, their economic outlooks and central bank policies differ significantly. The Reserve Bank of Australia (RBA) has maintained a more aggressive tightening stance, while the Reserve Bank of New Zealand (RBNZ) has opted for a more cautious approach. This divergence in monetary policy provides underlying support for the Australian dollar relative to its New Zealand counterpart. However, global economic uncertainty and potential fluctuations in commodity prices remain key factors that could influence this pair in the coming sessions.

Technical Analysis

On the hourly chart, AUD/NZD has successfully broken above a triangular consolidation pattern, with the price now sitting comfortably above the 34-period and 100-period moving averages. This bullish breakout, along with price consolidation above the moving averages, solidifies the primary bullish outlook for the pair.

The initial breakout above the resistance at 1.10446 has paved the way for a move towards the next resistance level at 1.10485, which aligns with the 127.2% Fibonacci extension. Should the price breach this level, further upside targets emerge at Fibonacci extensions of 161.8% at 1.10534, 200.0% at 1.10589, and 241.4% at 1.10648. These levels represent the potential continuation of the bullish momentum as buyers continue to gain strength.

Oscillator Readings and Momentum

The Relative Strength Index (RSI) currently reads 66, suggesting robust buying interest but also hinting at the possibility of a short-term pullback as it approaches overbought conditions. Meanwhile, the Moving Average Convergence Divergence (MACD) is firmly in positive territory, with a significant gap between the MACD line and its signal line. This reflects the strong momentum driving the current uptrend, reinforcing the bullish scenario as long as the price holds above 1.10446.

Key Support and Resistance Levels

• Resistance Levels:
• 1.10485 (127.2% Fibonacci),
• 1.10534 (161.8% Fibonacci),
• 1.10589 (200.0% Fibonacci),
• 1.10648 (241.4% Fibonacci)
• Support Levels:
• 1.10446 (recent breakout level),
• 1.10391 (61.8% Fibonacci),
• 1.10303 (last bottom)

Alternate Scenario

If the pair fails to break above 1.10534 and selling pressure mounts, we could see a correction toward the support at 1.10391 (61.8% Fibonacci level). A sustained move below this level could further challenge the bullish case, with potential support found at 1.10303. Such a move would indicate a waning bullish momentum and possibly set the stage for a deeper retracement.

Key Events to Watch

Several key events this week could affect the trajectory of AUD/NZD. On Tuesday, the RBA will release the minutes of its latest policy meeting, followed by a speech by RBA Governor Michele Bullock on Thursday. While these events are unlikely to shift current market expectations regarding interest rates, they could offer subtle insights into the RBA’s future stance. Additionally, Assistant Governor Christopher Kent is scheduled to speak on financial markets and monetary policy on Monday. Any remarks suggesting further tightening could bolster AUD support and continue to pressure the pair higher.

Conclusion

The AUD/NZD pair remains in bullish territory after breaking above a key resistance level and triangle pattern. If the current momentum persists, the next targets are set at 1.10485 and beyond. However, traders should remain cautious of potential pullbacks, especially as the pair approaches overbought conditions on the RSI. Market participants will closely watch RBA commentary for additional clues on policy direction.